Perspectives from the Global

Entertainment & Media Outlook

2018–2022
Trending now: convergence,
connections and trust

www.pwc.com/outlook

PwcOutlook18_042718_lj_FC-17-se_lj-ej_lj.indd 1 4/27/18 4:59 PM

 About this report
Welcome to this year’s special report on
the findings of our Global Entertainment
& Media Outlook. Every year we take a
deep dive into the data and analysis that
our team of researchers and industry
specialists have unearthed – with the
aim of providing fresh perspectives and
actionable insights.
Our comprehensive data and projections
on the 15 defined segments across 53
territories are just the start in creating
these insights. As in previous years,
Ennèl van Eeden
our authors have blended the data with
their own observations, experiences and
examples to turn raw information into
true intelligence.
What’s trending now? It’s clear we’re in a
rapidly evolving media ecosystem that’s
experiencing Convergence 3.0 – a new
and different wave of convergence driven
by different capabilities and higher
expectations, and manifesting itself
simultaneously in multiple dimensions.
In Convergence 3.0, the dynamics of
Wilson Chow
competition are evolving while a cohort
of ever-expanding supercompetitors and
more focussed players strive to build
relevance at the right scale. And business
models are being reinvented so all players
can tap into new revenue streams, by, for
example, targeting fans and connecting
more effectively with customers to
develop a membership mind-set.
The pace of change isn’t going to let
up anytime soon. New and emerging
technologies such as artificial intelligence
and augmented reality will continue
to redefine the battleground. In an era
PwcOutlook18_042718_lj_FC-17-se_lj-ej_lj.indd 2
when faith in many industries is at an
historically low ebb and regulators are
targeting media businesses’ use of data,
the ability to build and sustain consumer
trust is becoming a vital differentiator.
The result? To succeed in the future
that’s taking shape, companies must
reenvision every aspect of what they do
and how they do it. It’s about having, or
having access to, the right technology
and excellent content, which is delivered
in a cost-effective manner to an engaged
audience that trusts the brand. For
those able to execute successfully, the
opportunities are legion.
Writing this report was an exciting
and energising experience – and we
hope these qualities shine through. To
learn more about how our findings and
perspectives apply to your business,
please contact your local PwC team (see
page 32) or reach out to either of us. We
look forward to hearing from you.
Best regards,
Ennèl van Eeden
Global Entertainment and Media Leader
Partner, PwC Netherlands
ennel.van.eeden@pwc.com
Wilson Chow
Global Technology, Media and
Telecommunications Leader
Photograph pages 2–3: Jena Ardell / Getty Images
Cover photograph: Jasper James / Getty Images
Partner, PwC China
wilson.wy.chow@cn.pwc.com
4/27/18 4:59 PM
 Contents

04 Introduction: a new wave of convergence

08 Varieties of convergence

11 Supercompetitors and relevance at scale

15 Reinventing media business models

18 New technologies – new battlegrounds

22 Trust: from table stakes to differentiator

24 Regulation

26 Looking to the future: above and beyond

29 Methodology and definitions

30 Use and permissions

31 Contributors

32 Global Entertainment & Media

Outlook territory contacts

PwcOutlook18_042718_lj_FC-17-se_lj-ej_lj.indd 1 4/27/18 4:59 PM

PwcOutlook18_042718_lj_FC-17-se_lj-ej_lj.indd 2 4/27/18 4:59 PM
PwcOutlook18_042718_lj_FC-17-se_lj-ej_lj.indd 3 4/27/18 4:59 PM
 Introduction: a new wave of convergence

Convergence is all the rage again across entertainment

and media (E&M), technology and telecommunications.
The thick borders that once separated these industries
– and sectors within them – are dissolving. Large access
providers and platform companies are integrating
vertically, while established giants are integrating
horizontally. Companies that once offered only technology
and distribution are moving into content. The distinctions
between print and digital, video games and sports,
wireless and fixed Internet access, pay-TV and over-the-
top (OTT), social and traditional media are blurring.
Although they all had different starting points, many
companies in this converged entertainment ecosystem
are now aiming at business models that revolve around
direct-to-consumer relationships. The transformation

1
unfolding before our eyes is enabling this vast global
industry to keep growing at a pace close to its historical
rate – even amid significant disruption (see Exhibit 1).

Of course, convergence has been cited
– and hyped – before. But this time it’s
different. To explain why, we’ll start with
a brief history of the convergence seen to
date in the industry.
The first wave of convergence (let’s
call it Convergence 1.0) occurred
between 1999 and 2003. Hailed as
heralding a new paradigm in E&M,
this convergence had at its core a series
of deals involving traditional content
businesses and delivery-focussed or
distribution-focussed players whose
combination could accelerate growth and
value-capture across converging media
platforms. Broadcaster CBS merged with
Viacom, a pay-TV network company.
Telecommunications provider Telefónica
bought Endemol, a global television
production company and creator of
Big Brother. News Corporation added
DirecTV, a US-based satellite operator
then owned by Hughes Electronics, to
its global portfolio of video-distribution
assets. And in the biggest media deal
of all time, Internet portal AOL merged
with media conglomerate Time Warner.

4 Global Entertainment & Media Outlook  2018 –2022

PwcOutlook18_042718_lj_FC-17-se_lj-ej_lj.indd 4 4/27/18 4:59 PM

 2.0 – was less ambitious, deemphasising
Exhibit 1: Global E&M revenue (US$ tn)
enterprise-wide transformation in favour
Growth rates remain steady even as the industry is being transformed. of more measured vertical and horizontal
integration. Rather than viewing deals
2.5
2017–22
as an aspirational route to create entirely
CAGR
new businesses, companies aimed their
2.0 4.4%
efforts at owning more links of the value
chain and gaining scale. CBS purchased
1.5 CNET in 2008 to bolster its digital content
and advertising portfolio. In 2009, Disney
1.0
acquired Marvel Entertainment, which
had a complementary set of content
and character businesses. In 2011,
0.5
Comcast, primarily a cable operator,
acquired NBCUniversal, which owned
0.0 cable and broadcast networks, TV and
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 film production operations and theme
parks. Hearst in 2011 acquired 100
Global E&M revenue Global E&M revenue (projected data)
magazines from French media outfit
Source: PwC Global Entertainment & Media Outlook 2018–2022, www.pwc.com/outlook Lagardère, seeking to increase its global
reach. These transactions were, by and
large, successful, even if they didn’t
Exhibit 2: Global digital revenue as % of total revenue
dramatically reposition the combined
Digital revenues will continue to make up more and more of the industry’s income. companies in terms of new capabilities.

2022
2021
2020 56.9% Convergence 3.0
2019 55.8 %

2018 54.3% We are now in the midst of a third wave

2016
2015 45.6%
2014 42.6%
2013 39.7 %
36.8%
Global digital revenue
Source: PwC Global Entertainment & Media Outlook 2018–2022, www.pwc.com/outlook
At the time, it was believed that each
deal would produce transformative
benefits in terms of enhanced consumer
reach, new distribution and technology
capabilities and increased organisational
scale and efficiency. However, highly
optimistic projections for strategic and
operational synergies were generally not
met for a variety of reasons, including
mismatches in culture, insufficient
52.7 %
2017 50.8%
48.4%
Global digital revenue (projected data)
cross-business collaboration, breakdowns
in strategic planning and deal execution
and premature market timing. And in
each of these examples, the deals were
eventually unwound.
Driven by concerns about slowing
growth in core operations in a post-
recession environment, the second
wave of convergence – Convergence
of convergence. It is driven by a set of
imperatives and trends fundamentally
different from the prior two. In essence,
the revolutions that began to reshape
the E&M industries in the 1990s and
2000s have gathered critical mass
and are now in control. Technology
and communications companies have
become permanent players in the
E&M ecosystem. Furthermore, each
of the trends below, in its own right,
places pressure on players (and creates
opportunities) to diversify revenue
streams, position themselves in more
and different points in the value chain
and seek relevant scale. Taken together,
they exert an irresistible force. The
digital economy is several orders of
magnitude greater in size and scope
than it was a decade ago, and digital
spending is projected to gain market
share rapidly (see Exhibit 2).

Introduction: a new wave of convergence 5

PwcOutlook18_FINAL_Archive_051018_lj.indd 5 5/10/18 12:02 PM

 Exhibit 3: Five fundamental drivers of change
A handful of factors combine to create a new style of convergence.
Convergence 3.0 is Data analytics and
technology that can Personal-
starting from different
support better decision- isation
making are critical to success
core capabilities,
business models,
geographies, consumer
behaviours and Platforms rather than publishers
are the primary beneficiaries of Value shift
to platforms
consumer expectations
users’ growth in time and spending
compared with the
Source: PwC
prior waves.
Drivers of change
We see five fundamental drivers of
change (see Exhibit 3):
• Ubiquitous connectivity: ongoing
investments in technology and
broadband network infrastructure
have expanded coverage, capacity,
bandwidth and connectivity to the
point where consumers and their
devices are always connected and
always on. These developments
support an ever-expanding supply and
diversity of content, experiences and
applications that can be delivered
directly and digitally to users.
• The mobile consumer: as spending
grows, the connected mobile device is
rapidly becoming consumers’ primary
means of accessing E&M content and
services across virtually all markets
worldwide. That makes it imperative
for content creators, distributors and
platforms to develop the means to
reach and monetise mobile consumers
directly through mobile experiences
rather than through traditional sales
and distribution approaches.
6 Global Entertainment & Media Outlook  2018 –2022
PwcOutlook18_042718_lj_FC-17-se_lj-ej_lj.indd 6
Consumers and their devices
Ubiquitous are always connected and always on
connectivity
Mobile devices are
becoming consumers’
The mobile
consumer primary means of accessing
E&M content and services
Convergence
3.0
Need for
new sources
of revenue
Revenue streams that nourished
companies in the past will not be
growth flowing with the same force
• Need for new sources of revenue
growth: many sectors of the E&M
ecosystem are showing weak, stagnant
or even declining growth. Whether it is
newspaper companies in the UK, movie
theatre operators in the US, publishers
in Japan or magazine companies
around the world, players will find that
the streams that nourished them in
previous years will not be flowing with
the same force. Simultaneously,
telecommunications companies face
stagnant core businesses and are
looking at E&M as a growth driver of
new products, services and
experiences. Every company in the
E&M ecosystem is racing to develop
new revenue streams, especially in
digital (see Exhibit 4).
• Value shift to platforms: as
entertainment and media have
digitised, social media and technology
platforms, and not publishers (content
creators and packagers), have often
been the primary beneficiaries of
users’ growth in time and spending.
The platforms have shown greater
effectiveness in monetising across
4/27/18 4:59 PM
 advertising, subscriptions and
transactions. These platforms are
playing a more prominent role in
content creation. In parallel, many
publishers, especially in video, are
investing in their own platforms and
seeking to become more proficient in
technology, data and digital delivery.
• Personalisation: consumers no longer
want one-size-fits-all E&M experiences
determined by network programmers
or publishing editors. Neither do
advertisers. As a result, data analytics
and technology that can support better
decision-making with respect to
content, distribution, user experience
and monetisation have become
increasingly critical to success in the
E&M marketplace.
These drivers mean that Convergence
3.0 is starting from different core
capabilities, business models,
geographies, consumer behaviours
and consumer expectations compared
with the prior waves. The effects of this
third wave are likely to last longer and
Exhibit 4: Global Internet advertising vs. broadcast TV
advertising revenue (US$ bn)
Sectors such as TV advertising will need to find new sources of revenue to
offset stagnant growth.
2013 2014
Internet
advertising revenue 2017–22
CAGR
8.7 %
Broadcast TV
advertising revenue
2013 2014
Projected data
Source: PwC Global Entertainment & Media Outlook 2018–2022, www.pwc.com/outlook
PwcOutlook18_042718_lj_FC-17-se_lj-ej_lj.indd 7
be more constructive, especially given
the maturity and continued growth of
digital markets. The result is that many
players, regardless of their heritage of
core competencies, will have to compete
in several realms at once: content, access,
distribution, global footprint expansion,
technology, user experience, customer
intimacy and monetisation.
In fact, we’re already seeing some
of the participants from prior waves
take a more sophisticated approach
towards convergence. In February 2018,
Telefónica announced that its Movistar+
pay-TV unit would distribute 12 original
Spanish-language series to 13 countries
in Europe and Latin America through a
new channel, Movistar Series. In addition
to Telefónica’s own original programming
such as La Peste, a hit historical crime
drama set in 16th-century Spain amid
the outbreak of the bubonic plague, the
channel will distribute movies, shows
and documentaries created by third
parties. And the 110m Movistar mobile
phone customers will have access to
the content as well.
2015 2016 2017 2018 2019 2020 2021 2022
350
2017–22
CAGR
300
2.3%
250
200
150
100
2015 2016 2017 2018 2019 2020 2021 2022
Introduction: a new wave of convergence 7
4/27/18 4:59 PM
 Varieties of convergence

As the Global E&M Outlook highlights, the biggest

technology and telecommunications firms are now
acquiring and integrating E&M assets at a faster pace
and a larger scale than ever before. According to
PwC’s TMT Deals Insights, the number of media and
telecom deals rose 29% in 2017, to 876. But we are
seeing participants of all sizes, and in all geographies,
engage in strategic efforts that in prior eras
would have been classified as vertical integration,
horizontal integration or diversification. The reason
is that media, technology and telecommunications
enterprises now view it as an imperative to own
the user experience. What’s more, technology and
telecom players are keenly aware that content has the
potential to be a high-engagement, high-frequency,

2
high-usage application that keeps users across all
demographics and devices engaged and enables the
provider to build relationships with them.

The specific business objectives being
targeted vary from company to company:
for Amazon, it’s e-commerce, cloud
services and, increasingly, advertising;
for Apple, it’s devices; for a telecom
company, it’s premium connectivity and
related services (including subscriptions),
as well as advertising. In every case,
the underlying aim is to have a direct
end-user relationship that enables the
monetisation of engagement and loyalty
in a variety of ways.
These activities translate into four
varieties of convergence: convergence
in media; convergence in access;
convergence in business models; and
convergence in geographies.
Convergence in media
Convergence is taking place within the
media segment itself, as providers and
distributors link up with one another
in unprecedented and unexpected
ways. Indeed, the distinctions among
varieties of media are collapsing: an

8 Global Entertainment & Media Outlook  2018 –2022

PwcOutlook18_042718_lj_FC-17-se_lj-ej_lj.indd 8 4/27/18 4:59 PM

 investigative series by a newspaper is
now likely to include video, audio and
text, all published in a digital format;
additionally, distinctions are blurring
between a video series made by a studio
(Lionsgate), a pay-TV network (TNT,
AMC or HBO), or a video streaming
company (Netflix, Amazon or Hulu).
Video streaming services, TV networks,
telecoms and social media platforms
are all competing simultaneously
over live sports rights. Recent examples
include BT’s purchase of media rights
to English Premier League football,
Amazon’s streaming coverage of
NFL Thursday Night Football games
in the US and Facebook airing 25 Major
League Baseball games exclusively on
its platform. Twitter has live-streamed
the Melbourne Cup, Australia’s most
prestigious horse race, and Time
Warner recently acquired video rights
to the UEFA Champions League to
support the launch of B/R (Bleacher
Report) Live, its new sports-focussed
video streaming service.
Exhibit 5: Global digital music downloading revenue vs.
digital music streaming revenue (US$ bn)
Overall music revenue continues to rise, but demand is shifting from
downloading to on-demand streaming content.
$25
2017–22 2017–22
CAGR CAGR
$20 –23.7 % 18.0%
$15
$10
$5
$0
2013 2014 2015
Digital music downloading revenue
Digital music streaming revenue
Source: PwC Global Entertainment & Media Outlook 2018–2022, www.pwc.com/outlook
PwcOutlook18_042718_lj_FC-17-se_lj-ej_lj.indd 9
Similar convergence is evident in other
highly competitive spaces. We’re seeing
TV networks, telecoms, tech companies,
OTT services and movie studios compete
to provide a broad array of video content
to consumers. Radio stations, podcast
companies and music streaming services
are battling it out to deliver on-demand
audio content to users (see Exhibit 5). And The distinctions among
Google, Clear Channel and advertising
technology players are competing to
varieties of media
provide digital out-of-home services. are collapsing: an
investigative series by a
Convergence in access newspaper is now likely
(wireless/fixed)
Convergence is also under way in
to include video, audio
the telecommunications industry and text, all published in
as it prepares for mass rollout of
high-bandwidth 5G services. Simply
a digital format.
put, as consumers expect constant
connectivity, the old classifications of
wired, wireless, cable and satellite will
become meaningless. Multiple system
operators (MSOs, cable and satellite
TV companies) are launching wireless
plays. Telecoms are buying satellite and
2016 2017 2018 2019 2020 2021 2022
Digital music downloading revenue (projected data)
Digital music streaming revenue (projected data)
Varieties of convergence 9
4/27/18 4:59 PM

Exhibit 6: Global fixed broadband vs. smartphone data consumption (MB bn)
By 2020, smartphone data consumption will overtake fixed broadband, even as
both continue to grow rapidly.
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Fixed broadband
data consumption
2017–22
CAGR
18.8 %
Smartphone
data consumption
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Projected data
Source: PwC Global Entertainment & Media Outlook 2018–2022, www.pwc.com/outlook
MSO players. All are building or buying
fibre and spectrum. Wi-Fi hot spots are
becoming ubiquitous in public spaces.
Usage of mobile data is expected to
increase (see Exhibit 6). And as 5G gains
uptake and usage, fixed broadband will
face growing competition from wireless.
In turn, 5G is expected to act as a major
growth driver for entertainment and
media offerings. Improvements in speed,
quality and reliability will positively
affect areas such as mobile gaming, and
players will have the ability to deliver
more live video as well as immersive
virtual reality (VR) and augmented
reality (AR) experiences.
Convergence in business models
One interesting development is that
highly successful companies that
began life with very – even radically –
different business and revenue models
are converging on a similar macro
business model. Consider that Amazon
is predominantly an Internet retailer,
Disney is a content factory, Netflix began
life as a DVD-rental-by-mail business
and Apple rose to prominence in PCs
10 Global Entertainment & Media Outlook  2018 –2022
PwcOutlook18_043018_lj_FC-17-se_lj-ej_lj.indd 10
700,000
2017–22
CAGR 600,000
33.3% 500,000
400,000
300,000
200,000
Smartphone data consumption 100,000
overtakes fixed broadband
data consumption. 0 on a global basis, to play more games in
and mobile devices. And yet today, each
is simultaneously acting as a producer,
distributor and retailer of content.
We are also seeing convergence among
content, advertising and e-commerce,
as a single user expression or impression
can lead frictionlessly to a transaction
– whether it is a video game player
purchasing equipment for his avatar, an
Amazon Prime shopper downloading
a movie recommended to her by an
algorithm or an Instagram user scrolling
through her feed for fashion tips and
making an in-app purchase after viewing
a video from one of her favourite brands.
Among more focussed players, especially
in the publishing industry, we see
convergence in building a greater level of
direct-to-consumer revenues involving
subscriptions, live events, e-commerce,
licencing and consumer products.
We’ll take a closer look at business
models and new revenue streams in
chapter 4, beginning on page 15.
Convergence in geographies
Finally, we are seeing that companies
– especially the largest ones – are
converging on global markets. It’s
not an imperative for success in every
instance, but the cost of scaling into new
countries has fallen, and fresh markets
offer attractive growth opportunities.
Chinese players such as online and
mobile payments provider AliPay and
Wanda are competing aggressively
in Europe. The National Basketball
Association (NBA) is simultaneously
seeking to expand sales of its League Pass
London and Mexico City and to build
audiences in China and India. (See “NBA
Commissioner Adam Silver Has a Game
Plan,” by Christopher Vollmer and Daniel
Gross, strategy+business, Apr. 30, 2018.)
Netflix (in 190 countries) and Amazon
are driving global expansion of their
video streaming businesses. Theatre
operator AMC just opened its first cinema
in Saudi Arabia and plans to expand to
100 theatres there by 2030. In today’s
environment, the prospect of operating
globally isn’t only for giants. Business
Insider, the startup news site acquired
by Axel Springer, has editions in the
UK, Germany, South Africa, India, Italy,
Malaysia, Japan and several other countries
– including editions in local languages.
4/30/18 10:25 AM
 Supercompetitors and relevance at scale

As convergence plays out, the question arises:

what will the entertainment and media
ecosystem look like in the future? The forces
driving convergence will likely lead to the
emergence of supercompetitors. This handful
of global players that converge towards similar
business models will unite content, commerce,
advertising, communications and deep financial
resources under a single corporate roof. Each
will be looking to secure exclusive control of
every aspect of its own customer relationships,
consumption and activity.

In the early 2000s, the analogy of the As platforms assume a greater role in
walled garden was commonly used the E&M ecosystem, some already large
to refer to online companies that companies that are not currently viewed

3
looked to fence off their offerings
from the rest of the Internet and offer
exclusive experiences and content.
The supercompetitors have refined and
expanded this concept to the extent
that their walled gardens have effectively
become ‘walled savannahs,’ in which
consumers can roam freely without
feeling unduly restricted in terms of
choice and scope. Today, this type of
business is exemplified by companies
such as Amazon and Tencent that
combine content, commerce and
communications with massive
financial resources – attributes that
enable them to expand globally in a
world that’s balanced between Eastern
and Western behemoths.
as platforms may choose to consolidate
further in response, creating another
group of supercompetitors. Large
companies that choose to compete will
have to develop greater depth. That
line of thinking undergirds the decision
of Time Warner to sell itself to AT&T,
Disney’s decision to purchase 21st
Century Fox assets in December 2017
(and Comcast’s effort to disrupt it by
launching a bid to buy Sky TV, which
is 39% owned by Fox) and the ongoing
merger talks between CBS and Viacom.
Relevant at scale
Given the domination of a group of global
supercompetitors that are involved in
most if not every segment of E&M, as
well as other sectors, what can smaller

Supercompetitors and relevance at scale 11

PwcOutlook18_042718_lj_FC-17-se_lj-ej_lj.indd 11 4/27/18 4:59 PM

 E&M players do to stay in the game and
compete effectively? Is there a way to
play that’s not dependent on participating
in an arms race for global scale?
In our view – based partly on the insights
in this year’s Global E&M Outlook –
the answer is a resounding yes. It’s not
The rise of the that in a world of supercompetitors
with ever-rising scale, everyone else
supercompetitors becomes niche. Or that players face a
has created a deep- binary choice of seeking mass or being
satisfied with defensible niches. Rather,
pocketed class of the imperative is to build a business that
market participants has a relevant scale – that is, it has a reach
or intensity sufficient to matter
that can buy content, to users, advertisers and partners.
invest in startups and
After all, the rise of the supercompetitors
serve as buyers for has created a deep-pocketed class of
maturing businesses. market participants that can buy content,
invest in startups and serve as buyers
for maturing businesses. Amazon paid
US$900m for Twitch in 2014, for example.
Netflix’s projected US$8bn spending
on content in 2018 is finding its way to
production companies, studios, agencies
and content creators of all sizes.
More broadly, convergence has changed
the nature of competition. Those who
succeed will do so by focussing on direct
user relationships, forging commercial
bonds with fans, using data to provide
an excellent user experience, creating
compelling advertising products and
generally leveraging the loyalty and
engagement that quality content can
create. And these attributes are not the
exclusive domain of very large companies.
Far from it. In fact, in many ways, smaller
companies may be better placed to
develop the fan-based user streams that
are so vital in a converged world.
In the media space, companies as diverse
as Activision Blizzard, WWE and Barstool
Sports are all thriving because they can
create top-quality content experiences,
build authentic and direct relationships
12 Global Entertainment & Media Outlook  2018 –2022
PwcOutlook18_042718_lj_FC-17-se_lj-ej_lj.indd 12
with users and monetise those
connections in multiple ways.
Scripps Networks, the lifestyle TV
network portfolio that owns Food
Network and HGTV, has sold itself to
Discovery, owner of networks such as
Discovery Channel and Animal Planet,
in a merger aimed at creating greater
scale in nonfiction, nonscripted video
entertainment. Meredith acquired
Time Inc. not because it wanted the
flagship Time and Fortune titles (in fact,
it is selling them). Rather, it wanted to
bring Time Inc.’s women-targeted and
lifestyle publications, such as InStyle and
People, under the same umbrella as its
complementary brands, such as Better
Homes & Gardens. In both instances, the
two merged companies’ lifestyle genres
attract passionate enthusiasts and bring
greater scale among mainly female
audiences. The mergers not only allow
the aggregation of more first-party data
about users, but also make the companies
more attractive partners for advertising,
e-commerce and product licencing.
Other examples: By focussing on cable
systems in Europe, the Middle East and
the United States, Altice has emerged as a
large and powerful player. The New York
Times and Washington Post are adding
paid digital subscribers with remarkable
speed. And Imax in April 2018 struck a
deal to open dozens of its high-concept
theatres in China.
By building up relevant scale in a
single market, companies can develop
multiple streams while offering an
alternative advertising and marketing
outlet beyond the big platforms. In the
Netherlands, Talpa has combined under
a single roof commercial broadcast
television, several commercial music
radio stations, its own music streaming
business (Juke), several popular online
sites and the tech platform Diffrnt.
4/27/18 4:59 PM
 Big fans of fans
The key to this mentality, as
Christopher Vollmer pointed out
in a 2017 strategy+business article,
“How to Make Entertainment and
Media Businesses ‘Fan’-tastic,” is to
focus on fans, the core users who spend
time, attention and money engaging
with the content and with the company.
In an age of constant distraction and
endless choice, the value of devoted
users grows significantly.
In seeking to sell its general
entertainment assets to Disney, 21st
Century Fox is creating a narrower ‘New
Fox’ that will focus on two fan-based
businesses: live sports and news (Fox
News has one of the most passionate
user communities in the US).
Other highly successful fan-focussed
entertainment and media businesses are
thriving in an era of supercompetitors.
WWE, the professional wrestling giant,
has 1.8m subscribers to its streaming
video-on-demand service, WWE
Network. Spotify, the streaming music
behemoth, has between 92m and 96m
paying subscribers.
At times, relevant scale in these businesses
can appear niche-y. But there are many
highly defensible niches that offer room for
growth. Peloton, which offers personalised
exercise bikes and services, broadcasts
indoor cycling classes live to connected
devices 24/7. Peloton has developed into
a high-growth converged media device
business with relevant scale. It has 600,000
subscriptions with annual churn of just
0.3%, and 8,000 exercise classes streamed
on demand. M. Shanken, a lifestyle media
brand primarily for male luxury consumers
interested in wine, smoking and spirits,
has built up a network of destination sites,
including Wine Spectator, Cigar Aficionado
and Whiskey Advocate.
Relevant capabilities
What capabilities does it take to build
relevance at scale? Our research and
industry experience point to three vital
ones (see Exhibit 7):
• Be a powerhouse of quality and
engagement: as creators of high-
quality and distinctive content,
successful players are true specialists
who are passionate about their subject

Exhibit 7: Capabilities to build relevance at scale

Create a sense of identity and

Be a community with customers by
powerhouse delivering high-quality experience
of quality and
engagement

Relevance
at scale
Target content and Deliver Address fans’ interests and
experiences at high-value Aim at high- content and preferences in your content
value and advertising
audiences that others find hard-to-reach consistent
and advertisements
challenging to attract, and turn audiences with the
them into loyal fans brand

Source: PwC

Supercompetitors and relevance at scale 13

PwcOutlook18_043018_lj_FC-17-se_lj-ej_lj.indd 13 4/30/18 10:35 AM

 matter and care about delivering a
high-quality experience for their
audiences and fans. These attributes
create a sense of identity and community
between the brand and its customers
that is not easily matched.
• Aim at high-value and hard-to-reach
A brand’s video, article, audiences: most successful players
target their content and user
music or podcast is more experiences at high-value audiences
likely to be seen, read that others find challenging to attract,
engage and aggregate. They also tend
or heard by the fans for to be highly efficient and effective at
whom it was created. reaching these audiences and turning
them into active fan communities.
Largely as a result, these focussed
players enjoy a very high concentration
of defined user/fan groups. Many
members of their audiences self-
identify as loyal fans, and in turn
recommend the brand and content
experience to others, which further
accelerates organic growth.
14 Global Entertainment & Media Outlook  2018 –2022
PwcOutlook18_042718_lj_FC-17-se_lj-ej_lj.indd 14
• Deliver content and advertising
consistent with the brand and user
expectations: advertisements and
content focussed on a specific
experience, a narrowly defined theme
or a fan community are more likely to
be consistent, to be viewed, to be
brand safe and to be in the right
context for the users. It also holds true
that a brand’s video, article, music or
podcast is more likely to be seen, read
or heard by the fans for whom it was
created. In other words, when it comes
to getting people to consume the
content a company is offering,
addressing its fans’ interests and
preferences brings benefits in terms of
both subscriptions and advertising.
To the casual observer, it will appear as
though it’s the supercompetitors that
are taking over the world and absorbing
all the incremental growth. But those
who look more closely can clearly see
space beneath the ambit of the global
giants in which comparatively smaller
and more focussed companies can mine
a rich vein of revenues.
4/27/18 4:59 PM
 Reinventing media business models

A deep dive into the data reveals something

of a disjunction. On the one hand, the overall
volume of E&M spending continues to rise at a
steady, reliable clip along with economic growth,
placing the industry in the same bucket as consumer
products and similar sectors. On the other hand,
underneath the seemingly placid top line, an immense
amount of churn is taking place, with different
subsectors and geographies on sharply different –
and occasionally volatile – trajectories. All this
contributes to players’ sense of an urgent need to
rethink and reengineer their business models. At
every point in the value chain, in every country,
companies are having to reconsider precisely how
and where they generate revenues and what role

4
they play in the E&M ecosystem.

Take advertising. Global spending on fire-sale price of US$50m in November

marketing is rising, especially the digital
component. But there is a widespread
concern over the viability of existing
models that centre on advertising.
• In TV advertising, so many commercial
• In digital advertising, the duopoly of
Google and Facebook continues to
gather the lion’s share of US digital
advertising, about 57%. One result of
this dynamic is that digital publishers
that were the darlings of the industry
just a few years ago – BuzzFeed, Vice,
Mashable and many others – have
struggled to meet ad sales targets that
were formerly achievable. Mashable,
valued at US$250m in 2016, went for a
2017. DNAinfo, which owned local
news sites such as Gothamist, simply
closed its doors.
pods have been stuffed into prime-
time shows that it’s had the effect of
driving viewers away from consuming
linear ad-supported video. TV
networks are reducing their ad loads
and innovating with ad formats: for
example, in February 2018,
NBCUniversal said it was planning to
cut ad time during its prime-time
shows by 10% and to reduce the
number of ads in its pods by 20%.

Reinventing media business models 15

PwcOutlook18_042718_lj_FC-17-se_lj-ej_lj.indd 15 4/27/18 4:59 PM

 Exhibit 8: Global streaming share of recorded music revenue
and OTT share of home video revenue (%)
The rise of streaming has shifted revenues away from advertising
and towards subscriptions.
2013 2014 2015
OTT/home video
Streaming/rec music
2013 2014 2015
Projected data
Source: PwC Global Entertainment & Media Outlook 2018–2022, www.pwc.com/outlook
• Ad skipping and ad blocking are having
an impact, as consumers act on their
Large segments of the preference to avoid advertising by using
consumer marketing ad-blocking tools, skipping ads,
consuming shows on DVR and fast-
world are now choosing forwarding through the ads, or simply
direct-to-consumer doing something else during ad breaks.
In February 2018, Google said it would
models and building build an ad blocker into its Chrome
brand-direct marketing browser to protect users from the most
intrusive and annoying online ads.
and media capabilities.
• Large segments of the consumer
marketing world are now choosing
direct-to-consumer business models and
building brand-direct marketing,
e-commerce and media capabilities,
creating a significant ripple effect on
media and advertising. Digital-first
boutique brands that don’t rely on
physical retail or on mass advertising
have been making headway, including
Dollar Shave Club (razors), Casper
(mattresses), Warby Parker (eyewear),
Away Travel (travel), Birchbox
(beauty), Everlane (apparel) and the
Honest Company (household
products). They largely eschew
16 Global Entertainment & Media Outlook  2018 –2022
PwcOutlook18_043018_lj_FC-17-se_lj-ej_lj.indd 16
2016 2017 2018 2019 2020 2021 2022
100
80
60
40
20
2016 2017 2018 2019 2020 2021 2022
advertising on television, radio,
newspapers and digital publications in
favour of content experiences designed
for social media, e-commerce and their
own branded assets. Amazon, with its
Prime shopping platform, has emerged
as a locus for advertising. JPMorgan
Chase estimated that Amazon’s ad
revenues were US$4.5bn in 2017.
• Growth in streaming video-on-
demand (SVOD) and OTT subscription.
Whether Netflix or Amazon Prime,
the NBC Sports Gold Cycling Pass
or the NBA League Pass, HBO Now,
Hulu or CBS All Access, SVOD and
OTT subscriptions are one of the
fastest-growing components of the
video ecosystem. And they are
primarily ad-free. With each passing
month, a greater proportion of
premium video viewing is taking
place through subscription-supported
environments, especially among
affluent households (see Exhibit 8).
4/30/18 10:37 AM
 Developing new streams
of revenue
Given the prospect of such disruptions,
it’s hardly surprising that building new
revenue streams is at the top of the agenda
for every player in the E&M industry,
especially those that are currently reliant
on advertising. In fact, companies are
exploring an expanding array of strategies
to build new streams. (For a more
thorough description, see “The Revenue
Stream Revolution in Entertainment
and Media,” by Christopher Vollmer,
strategy+business, May 7, 2018.) Some
approaches are listed below.
Maximising distribution reach by
monetising existing core brands, products
and intellectual property through new
channels and platforms, either owned
and operated or accessed via partners.
In less than three years, HBO Now,
the channel’s on-demand service, has
attracted 5m subscribers. CBS All Access,
the television network’s subscription
video service (offered with limited
commercials for US$5.99 per month or
commercial-free for US$9.99 per month),
debuted in the fall of 2014. Powered by
exclusive original series such as Star Trek:
Discovery and The Good Fight (a spin-off
of the popular CBS Network series The
Good Wife), the video service has grown to
2.5m subscribers, adding approximately
500,000 in the last year.
Developing new ad products. Sky’s
AdSmart platform serves addressable
households (those within a defined or
targeted audience) different ads during
the same TV programming, targeting
viewers’ demographics, location, shopping
habits and behavioural attributes. Sky
has created more than 1,200 audience
segments – examples include ‘sports
car fans’ and ‘luxury travellers’ – that
advertisers can target. Sky charges a
significant premium for AdSmart ad
units, up to eight times the rates for non-
addressable TV inventory.
PwcOutlook18_042718_lj_FC-17-se_lj-ej_lj.indd 17
Closing the loop between user
engagement and commerce activity.
Video game company Ubisoft, like its
peers Activision, EA and Take-Two, has
shifted its strategy from releasing annual
blockbusters to reinventing franchises
such as Assassin’s Creed and Tom
Clancy’s Rainbow Six Siege as live digital
services. In-game microtransactions, or
what Ubisoft refers to as ‘recurring player
investments,’ such as a US$4.99 ‘unicorn
mount’ for Assassin’s Creed players,
grew 87% in fiscal year 2018, and now
represent 27% of total company revenue.
Extending the brand from media
properties into new revenue streams
through physical experiences and products.
Tasty, BuzzFeed’s foodie brand, parlayed
its massive social media fan base across
Instagram (17m followers), Facebook (94m
likes) and YouTube (6m subscribers)
into a multimedia franchise that now
also includes an eponymous best-selling
cookbook and a line of Tasty-branded
kitchen tools at Walmart.
Encouraging a membership mind-set
that allows a company to sell premium
media experiences and related benefits,
products and services. The New York Times
Company saw its digital subscriptions
soar from 910,000 in 2014 to 2.64m in
2017. The engaged subscriber fan base
has become an attractive monetisation
target for consumer offerings such as
travel (New York Times Journeys),
product recommendations (Wirecutter, a
site acquired in 2016) and events (Times
Talks, New York Times conferences
and subscriber events).
Prospecting for new revenues in
entirely new entertainment and media
markets. Video games publishers
and sports entertainment entities
increasingly view e-sports as their next
big revenue growth engine (see “Video
Gaming Levels Up into a Sport,” by
Bob Woods, strategy+business, Apr.
23, 2018). Tencent’s Riot Games has
introduced a franchise structure for
its North American League of Legends
Championship Series (NA LCS).
Activision has created a professional
league around Overwatch. Electronic
Arts is developing e-sports competitions
for both its Madden and FIFA franchises.
Globalising aggressively by pushing
into new geographic markets. Netflix
is currently available in 190 countries.
Having grown tenfold between 2012 and
2017, international subscribers (62.8m)
now exceed the company’s domestic
subscribers (54.8m). Netflix curates
content, in any language, that would appeal
to the nearly 2,000 ‘taste communities’
it identified during the course of its
global rollout. Taste communities are
groups of subscribers around the world
who are fans of certain types of content,
regardless of where they live.
Business model innovation
has much further to run
As the drive to create new E&M business
models continues, it’s clear that the
pressure driving this wave of innovation –
not least the squeeze on ad revenues – won’t
ease off anytime soon. So the reinvention
has much further to run, and the industry-
wide move to tap into and develop new
streams may have only just begun. Ongoing
advances in technology will be one of the
main forces that aid in that effort.
Reinventing media business models 17
4/27/18 4:59 PM
 New technologies – new battlegrounds

Across all segments of E&M, technology is enabling

cheaper and more personalised content delivery.
That is having the effect of squeezing out less efficient
players, intensifying pressure on all links in the
value chain and opening the way to the creation of
new formats, such as e-sports. For all participants in
E&M, cost efficiency is an important element of future
viability. And the more traditional conglomerates,
many of which have legacy cost structures in place, find
themselves competing against challengers with different
cost structures. This only heightens the sense of urgency
with respect to investing in new technologies that can
help companies compete more effectively.

Data analytics

5
and insights
As business models and capabilities
change, it’s clear that data and
analytics will play a pivotal role in
E&M. Today, many companies still lack
the data and analytics capabilities they
need to deliver content, advertising
and other experiences to the right
users at the right time and in the right
context – although this is clearly a
high-priority investment area for many.
As companies in E&M pursue new
revenue streams, first-party data has
emerged as perhaps the most valuable
asset. Schibsted, the Norwegian media
company, has developed prediction
models that determine how likely
it is that an ad-supported user can
be converted to a subscriber. After
analysing first-party signals such as
the frequency of visits, it assigns each
user a ‘propensity score’ that indicates
his or her likelihood to subscribe
(high, medium or low). Schibsted then
tailors the user experience (by, for
example, enticing high potentials with
greater content access before they hit
the paywall) to encourage conversion.
The model identifies readers who are
three to five times as likely as average
users to subscribe.

One component of the technology impact is data and analytics to all media operations
the growing importance and centrality of (see box on data analytics and insights).

18 Global Entertainment & Media Outlook  2018 –2022

PwcOutlook18_042718_lj_18-BC-ej_lj-se_lj_V2.indd 18 4/27/18 5:13 PM

 PwC’s essential eight
PwC analysed more than 150 emerging
technologies to pinpoint the essential
eight: a set of technologies that every
organisation, both in E&M and beyond,
must consider in formulating its tech
strategy (see Exhibit 9).
Although each will play a significant
role in E&M, it’s clear that one (AI) will
dominate, two others (AR and VR) are
already beginning to play supporting
roles and a fourth (blockchain) is likely
to enter the conversation.
AI will have a pervasive impact on all types
of companies involved in E&M and will
become the industry’s new battleground.
• Mimicking techniques perfected
by the airline industry to maximise
ticket revenue from seat sales, game
publishers are using data to adjust prices
dynamically for microtransaction
items based on user demand. They
also analyse player context to determine
where, when and how to best
merchandise and promote items to
users in-game.
• Like companies in most other
industries, media firms have started
experimenting with AI in areas such
as voice control and chatbots. As
experimentation starts to turn into real
products, 2018 is seeing the emergence
of production-grade tools from firms
including Amazon Web Services,
IBM and Google that can help E&M
providers build more engaging services,
delight customers more effectively and
drive additional revenues.
• Factmata, a startup that uses AI to spot
fake news, hate speech, abusive
content and extreme clickbait, has
raised funds from investors including
Internet entrepreneur Mark Cuban.
AR and VR take off
The potential power of AI in E&M is
further increased by the opportunity
to combine it with other emerging
technologies, especially virtual reality

The impacts will be many and highly

Exhibit 9: The essential eight technologies
diverse. Netflix’s recommendation
algorithm is one prominent example of Companies in every industry, not just E&M, must reckon with these innovations.
how AI builds consumer engagement and
satisfaction. But in the next few years,
more and more telecommunications Internet of Things
companies will launch voice-controlled
AI assistant interfaces for their pay-TV
and smart home products and services. Robots Augmented
This widespread adoption of AI will not reality
only enhance the customer experience
that companies provide, but will also
allow them to protect their relationships
with consumers. To date, Amazon’s
Alexa and Google Assistant have been
prevalent in the market for AI-enabled
virtual assistants. But fierce competition Essential
is coming, in the shape of the next Drones Virtual
eight reality
generation of AI-powered ‘smarter
phones,’ which will combine voice
interfaces with the use of algorithms to
anticipate and infer users’ intent.

AI will also continue to advance on

other fronts:
3D printing Blockchain
• NBCUniversal, which is reducing the
number of ads in its prime-time shows,
said it would use a new AI-driven Artificial intelligence
targeting tool to make its ads more
relevant for audiences. Source: PwC

New technologies – new battlegrounds 19

PwcOutlook18_043018_lj_18-BC-ej_lj-se_lj.indd 19 4/30/18 10:41 AM

 Exhibit 10: VR growth in 10 key markets*
Sales of VR headsets are projected to rise and bring revenues along with them.
$25,000 200
2017–22 180
CAGR
$20,000 40.4% 160

VR revenue (US$ m)
140

VR units (m)
$15,000 120
100
$10,000 80
60
$5,000 40
20
$0 0
2016 2017 2018 2019 2020 2021 2022

VR revenue VR units
VR revenue (projected data) VR units (projected data)
* US, Japan, China, South Korea, UK, France, Germany, Russia, Italy, Spain

Source: PwC Global Entertainment & Media Outlook 2018–2022, www.pwc.com/outlook

and augmented reality. Revenues One media business that is leading

from VR apps, gaming and video, the way in promoting and applying
Blending AI and which were US$3.9bn in 2017, are VR is the UK’s Guardian Media Group.
VR/AR can have a expected to soar more than fivefold The website of the company’s flagship
by 2022 (see Exhibit 10). In the VR newspaper, the Guardian, offers readers
transformational impact space, the installed base of headsets a free downloadable VR app, together
on the ability to derive is projected to grow substantially, with a click-through opportunity to buy
helped by Facebook launching its a Google Cardboard headset. One day
actionable data on US$199 untethered Oculus Rift in the in October 2017, it bundled a Cardboard
consumers’ behaviour. second quarter of 2018 for gaming, headset free with every edition of the
education and enterprise use. The price newspaper. Using the headset and app,
point is significant: the Rift originally readers are offered VR experiences
sold for US$599, and required a such as investigating a murder scene or
computer costing several hundred exploring subterranean London.
dollars to power the related VR
experiences and games. The Void, a location-based VR startup
that has rolled out a Ghostbusters VR
Blending AI and VR/AR can have experience in four locations, has created
a transformational impact on the a Star Wars–branded experience, ‘Star
ability to derive actionable data on Wars: Secrets of the Empire,’ at Disney
consumers’ behaviour. For example, resorts. The experience integrates the
the VR analytics company Retinad Void’s hardware and software with
has developed heat-map technology the physical space.
that tracks where a person in a virtual
environment looks and for how long. VR will remain significant for E&M
In the future, apps could harness that companies, but mobile AR is poised to
data to create experiences geared play an even more transformative role for
to specific individuals. the industry. After the massive success of

20 Global Entertainment & Media Outlook  2018 –2022

PwcOutlook18_042718_lj_18-BC-ej_lj-se_lj_V2.indd 20 4/27/18 5:13 PM

 Pokémon Go, and both Apple and Google
announcing their platforms for mobile AR
(ARKit and ARCore, respectively), 2018
is poised to be a breakthrough year for
these types of applications.
Games will continue to dominate in the
mobile AR category. But several other
key app types will also grow, including
navigation, home improvement and
experiences designed by brands to
increase consumer engagement. Also,
alongside E&M companies, we’ll see other
(often closely adjacent) industries adopt
both AR and VR to create immersive
customer experiences. These adopters
will include museums presenting
collections virtually and football clubs
offering remote action experiences – thus
competing for user attention that used to
belong to E&M.
NextVR and the NBA have partnered to
create a VR experience for subscribers to
the NBA’s League Pass. Shooting the action
with eight specialised cameras, NextVR
captures angles of the game and streams
them live to subscribers who are watching
through NextVR’s Samsung Galaxy Gear
VR – so that they can effectively be just
behind the hoop as LeBron James swoops
in for a thunderous dunk. In 2018, Intel
created a March Madness Live VR app
to allow fans of college basketball to
experience NCAA tournament games
in new ways while watching through
Samsung and Google devices.
PwcOutlook18_042718_lj_18-BC-ej_lj-se_lj_V2.indd 21
Blockchain plays a greater role
The emerging technology of blockchain
is likely to evolve as an enabler of digital
transformation for E&M companies.
Blockchain has the potential to grow
into a key capability, helping companies
keep track of content assets, avoid
contractual disputes and establish the
certainty and accountability that will Blockchain could
foster trust with business partners and
customers. Looking more widely across
bring benefits in areas
the E&M ecosystem, commentators have as diverse as royalty
highlighted that blockchain could bring
benefits in areas as diverse as royalty
tracking and collection,
tracking and collection, crowdfunding digital advertising
of creative productions, digital
advertising impact measurement
impact measurement
and piracy prevention. and piracy prevention.
To respond effectively to this expansion
in the competitive environment, media
companies should work out how to partner
with organisations that have expertise in
the relevant new technologies.
However, these are just initial steps
– and the next frontier has yet to be
crossed: securing the data, using it to
improve experiences and monetising
it more effectively, all while retaining
and growing customers’ trust. That’s the
looming challenge for the industry.
New technologies – new battlegrounds 21
4/27/18 5:13 PM
 Trust: from table stakes to differentiator

The level of trust in companies among both

consumers and business-to-business customers is
an increasingly prominent topic of debate, and E&M
companies are intensely affected by it. Trust will
also be a vital determinant of the sector’s ability to
attract and sustain revenues in the future, from both
subscriptions and advertising (see Exhibit 11).

Exhibit 11: Five vital dimensions of trust

Is your content Is your audience Are you taking Are your Is your company
trustworthy? who you say it is? proper care of investments good for society?
Advertisers are raising Media and
the data? paying off? The sheer size, reach
questions about the academic reports More E&M companies Direct measurement of and utility of today’s

6
quality, safety and have suggested that are assuming more audience engagement – media platforms
appropriateness of the many social media responsibility for whether an agency is are resurfacing this
content advertisers accounts are bots. protecting credit delivering the promised philosophical question.
advertise against. card numbers. audience to a client –
has not been answered
to satisfaction.

Source: PwC Global Entertainment & Media Outlook 2018–2022, www.pwc.com/outlook

E&M isn’t alone in depending crucially to build trust with consumers,

on its ability to build trust for its long-
term well-being. The industry shares that
need with others including technology,
financial services, automotive and
professional services. But the rising
importance of data – and the central
place that the usage, storage, sharing,
mining and safety of consumer data
plays in the emerging landscape – is
pushing trust to an even more central
position. In the old environment, it was
comparatively easy for E&M companies
customers, clients and society at large.
Today, things are more complicated.
Companies today must demonstrate
trust across multiple dimensions.
Content trust: is your content safe?
Broadly speaking, advertisers are
raising questions about the quality,
safety and appropriateness of the
content they advertise against. As
algorithms serve up millions of ads
without human intervention –

22 Global Entertainment & Media Outlook  2018 –2022

PwcOutlook18_043018_lj_18-BC-ej_lj-se_lj.indd 22 4/30/18 10:43 AM

 sometimes accompanying videos with
objectionable content – major companies
have grown concerned about brand
safety on some of the leading platforms.
Global consumer goods giant Unilever
threatened to pull its advertising from
online platforms if they don’t take steps
to remove content that, in the words of
CEO Keith Weed, creates “division in
society and promote[s] anger and hate.”
Whether it takes the form of policing
comments, imposing standards on news
items or reinjecting human judgment into
programmatic advertising, publishers,
agencies and marketers must take pains
to ensure that content is trustworthy.
Audience trust: is your audience
who you say it is? Today’s technology
offers the tantalising prospect of ultra-
precise audience measurement: who
is watching and for how long? But
legitimate questions have been raised
as to how much faith can be put in the
measurement. A series of media and
academic reports have highlighted
the presence of bots, or fake accounts,
on social media platforms. Multiple
investigations have shown that it is quite
easy for people to create personas – even
entire organisations – on social media
platforms that don’t exist in real life.
Data trust: are you taking appropriate
and proper care of the data that
consumers entrust to you? As more
E&M companies enter direct commercial
relationships with customers, whether
selling products inside video games or
signing up subscribers to OTT apps, they
are assuming more responsibility for the
protection of credit card numbers. In an
age of large-scale hacks, it is natural for
users to question whether it makes sense
to transact so freely. At the same time,
the ability of app developers to access
the profiles of tens of millions of social
media account holders has highlighted
the dilemma of data protection – even in
instances when users may have accepted
PwcOutlook18_042718_lj_18-BC-ej_lj-se_lj_V2.indd 23
terms and conditions that allow for the
sharing of data.
Monetisation trust: are your
investments paying off? Again,
e-commerce and online advertising
and marketing offer the potential for
transparency and direct measurement.
But questions about how audiences are
measured, or the length of time people
actually viewed an online video counted
as a view, or what percentage of viewers
are skipping ads, or whether a publisher
is delivering the promised audience to an
agency, or whether an agency is delivering
the promised audience to a client have not
been answered to everybody’s satisfaction.
Ecosystem trust: is your company or
industry good for society? This may
seem like a philosophical question. But,
again, within the past year, we have seen
significant questions raised about the
use of television networks as vehicles for
propaganda, about the pervasiveness of
hate speech on discussion boards and
about the use of social media platforms
by parties that sow division and ethnic
strife. To a degree, this is nothing new.
In the 1960s, FCC Commissioner Newton
Minow railed against television as a vast
wasteland. (Now television is regarded
as the locus of much of the finest
programming.) In the 1980s, prominent
Washington figures campaigned against
explicit lyrics in rap music. (Hip-hop
has since become mainstream.) But the
sheer size, reach and utility of today’s
media platforms are making them a
target once again.
Trust as a differentiator
Typically, trust would be seen as a
qualifier that supports a business’s or
industry’s licence to operate. But a strong
case can be made to view and treat trust
as a differentiator. Companies that have
trust with everyone they do business with
will enjoy a competitive edge over those
that don’t – from private individuals to
massive corporate business partners.
How do companies build trust?
Obviously, it starts with the content
and the brand. A greater sense of
transparency is vital if trust is going to
be built within the entire ecosystem.
Consumer products should take their
cue from consumer-facing companies
that have taken pains to share more
information about their operations
and products with consumers, vendors
and the public. Patagonia created The
Footprint Chronicles, an interactive guide
that helps customers dig into its supply
chain. Hershey is making nutrition data
more prominent on packaging, and
Whole Foods offers transparency on the
use of genetically modified organisms. It
is possible to build trust via the sharing
of information without compromising
competitive advantage.
Trust: from table stakes to differentiator 23
4/27/18 5:13 PM
 Regulation

The ability to comply with evolving regulations

continues to be a vital task for E&M companies
– and it can be a catalyst in building trust.
The EU’s General Data Protection Regulation
(GDPR), which went into effect in May 2018, requires
sweeping changes in how businesses and public-sector
organisations handle and use their customers’ personal
information. As well as creating compliance challenges,
the GDPR provides an opportunity for E&M companies to
upgrade their systems, communicate superior protection
for customers and demonstrate their trustworthiness.

Although significant, the GDPR is just most significant is ‘Do no harm,’ which
one of the fundamental shifts under reflects the inherent tensions between
way in the global regulatory landscape, safety and innovation. This trend could

7
which has profound implications
for E&M businesses in all segments
and geographies. In many ways, the
current regulatory trends are forcing
every company’s hand. But the good
news is that complying with the new
regulations can increase customer
trust in E&M businesses.
Top policy trends for 2018
At a macro level, PwC has identified
eight top policy trends for 2018 that in
combination are reshaping the global
regulatory environment (see Exhibit 12).
These trends reflect growing challenges
to the established architectures of trade,
taxation, security and communications.
Clearly, some of the eight trends we
highlight in the exhibit will have greater
impacts on E&M than others. One of the
see tech – and especially social media –
companies face new regulations affecting
key areas of their business, including
disclosure requirements for sources of
online advertising and obligations to
police user-generated content.
Another policy trend with particularly
significant implications for E&M is
‘Digital discontent.’ Owing to rising
dissatisfaction and concern with some of
the effects of digital technologies, there
is a heightened focus on and conversation
about regulation. Indeed, just as E&M is
experiencing convergence, the regulatory
domain is also experiencing a degree of
convergence. Social media companies are
facing the possibility of being regulated
in a similar way to how utilities were
regulated a century ago, as operators of
vital public services.

24 Global Entertainment & Media Outlook  2018 –2022

PwcOutlook18_042718_lj_18-BC-ej_lj-se_lj_V2.indd 24 4/27/18 5:13 PM

 Exhibit 12: Top trends affecting policy and regulation in 2018
Judges will interpret – and
define – new architectures.
Custom solutions will Deregulation
prevail in a reimagined – rhetoric or
global landscape.
reality?
The US will no longer
set the world’s regulatory New outlier
pace, and corporations will
respond as mini-sovereigns.
Humans will reassert themselves in
the battle between safety and innovation
as regulation of new technology evolves.
Source: PwC, Top Policy Trends of 2018
There are also differences between
approaches to regulation at a regional
level. In the US, questions are being
posed about whether the regulatory
environment may be becoming less
favourable to supercompetitors and more
favourable to incumbents. Meanwhile, in
Europe, one of the by-products of concern
about trust is a higher level of direct
regulation (notably the GDPR) and calls
for yet more regulation.
Self-regulation
One way to build trust is to engage with
other E&M companies and even other
industries to create a self-regulatory
organisation (SRO), which sets agreed
standards and monitors the signatories’
behaviour against them. An SRO is an
approach to regulatory oversight wherein
the members of an industry or industry
subgroup band together to define a set
of rules or principles with which all the
members of the group agree to comply.
SROs are already commonplace in
industries such as financial services;
one example is the Financial Industry
Regulatory Authority (FINRA) for
organisations involved in securities
Regulation 25
PwcOutlook18_042718_lj_18-BC-ej_lj-se_lj_V2.indd 25
America
Storm the First meets Everyone will be a China watcher.
court One Belt,
One Road
The skills Companies that reinvent
challenge their own talent will gain
Top trends an edge. Self-regulatory
affecting
policy and organisations help
regulation
in 2018 Virtual cash,
virtual
Digitisation of currency will
create a clash among nation-
build trust, because the
weapons states, corporations, civilians
and bad actors.
member companies are
Do no Digital Tech giants will seek to regain trust with
collectively choosing to
harm discontent self-regulation and new solutions. behave in an ethical way.
brokerage. SROs are starting to
emerge in E&M, through initiatives
such as the recent collaboration to
create ‘trust indicators.’
SROs can be the most efficient way to
strike a balance between the potentially
negative impacts of rapid innovation
and the responses of regulators and
policymakers to mitigate those impacts.
An SRO is not as constrained by national
borders as traditional regulation tends to
be. The overarching advantage of SROs
is that they help build trust, because
the member companies are collectively
choosing to behave in an appropriate and
ethical way. It’s even possible to create a
stamp of approval, by implementing an
annual third-party certification process
to ensure that those that have committed
to complying with the principles are
actually doing so.
Overall, what’s clear is that regulation is
changing – but that the E&M industry will
continue to change even faster in terms
of offerings, go-to-market strategies,
business models, technology and trust.
4/27/18 5:13 PM
 Looking to the future: above and beyond

The future holds both a great deal of promise and

significant challenges. The good news is that, overall,
the amount of time and money spent on E&M industries
is growing throughout the world. And that trend shows
no sign of slowing. Our lives may appear to be saturated
with media. But every day, new viewers are coming
of age and attending their first movie, millions of
people are plugging into the Internet for the first time,
or getting their first smartphone, or gaining enough
income to spend on a digital publication (see Exhibit 13).

Exhibit 13: Data consumption CAGR by content type, 2017–22

Consumers are expected to spend more time engaging in E&M sectors.

Communications 28.5%

8
Games 27.8%

Video 25.4%
Other digital
content 24.2%

Music 23.9%
Social
networking 20.7 %

Web browsing 18.8%

Source: PwC Global Entertainment & Media Outlook 2018–2022, www.pwc.com/outlook

The challenge is that the way in
which that time and money is spent
is shifting – in some instances,
dramatically. For many, the business
model that worked for the last 10 years
may not work in the next 10 years. In
fact, it may not work in the next three
years. For many businesses, the models,
assets, practices and capabilities that
support their current market positioning
likely will not be sufficient to carry
them into the future.

26 Global Entertainment & Media Outlook  2018 –2022

PwcOutlook18_042718_lj_18-BC-ej_lj-se_lj_V2.indd 26 4/27/18 5:13 PM

 Exhibit 14: Who’s on the hook? Consumers say businesses
more than government

92%
82% 80%
72% 70%
60%

Agree Say Agree Believe Say Say the

companies government government companies government responsibility
must be should regulation are better is ineffective of protecting
proactive regulate of new equipped in ensuring data rests
about data companies’ technologies than fair use of with the
protection use of data is crucial for government their data company
consumer to protect collecting
protection their data the data

Source: PwC US Protect.me Survey, 2017

The question is how companies should at partnering – a capability that has

and will react to this reality. It is clear
that armed with this knowledge (and
with the robust data of the Global E&M
Outlook), E&M companies will have
to go above and beyond.
Above and beyond how they currently
envision themselves: every E&M
company now faces important choices
about its future basis for competition.
How will it seek to win? This choice
is essentially between becoming a
supercompetitor and building relevance
at scale; between embracing complete
convergence and embracing selective
convergence. Whichever way this
decision goes, the effort will bring its
own challenges. Businesses seeking
convergence must either muster the
resources necessary for acquisitions
and investment, or improve their ability
not traditionally been core for media
companies. Building relevant scale
will require becoming a powerhouse
of quality and engagement by having
content creators who are as passionate
about the subject matter as the target
fans; engaging high-value, hard-
to-reach audiences that can translate
into powerful and distinctive fan
communities; and maintaining
consistency and brand safety with
respect to content and advertising.
Above and beyond the way they
currently make money: E&M
companies must develop an urgency
in the creation of new revenue streams.
They must distil more value from the
streams they currently have, continually
prospect for new streams and adopt
a strategic mind-set that permits

Looking to the future: above and beyond 27

PwcOutlook18_042718_lj_18-BC-ej_lj-se_lj_V2.indd 27 4/27/18 5:13 PM

 investment and experimentation to
connect directly with users and monetise
those relationships in new ways.
Above and beyond their current
capabilities: E&M companies must
To build trust, build a strong content creation and
companies should curation capability, supported by a
clear understanding of the economics
do more than what’s behind it. But they must also develop a
required by law. more refined understanding of customer
segments and needs – including
customers’ willingness to accept
advertising – by leveraging data and
analytics. They must add team members
who can focus on developing compelling
user experiences and retention
strategies, as well as building loyalty and
understanding lifetime customer value.
28 Global Entertainment & Media Outlook  2018 –2022
PwcOutlook18_042718_lj_18-BC-ej_lj-se_lj_V2.indd 28
Above and beyond the way they build
and retain trust: a recent research report
in PwC’s Consumer Intelligence Series –
Protect.me – finds that 85% of consumers
will not do business with a company if
they have concerns about its security
practices, and 92% believe they should be
able to control the information available
about them on the Internet (see Exhibit
14). Given the ingenuity of hackers and
the intensification of regulatory, social
and media attention on data security and
trust issues, companies have to redouble
their efforts. To build trust, companies
should do more than what’s required by
law. They should proactively manage
cybersecurity and privacy risks in a way
that goes beyond a compliance checklist
approach and enables customers both
to see the data held about them and to
control how it’s used.
In the E&M world, there is no guarantee
of success, and no single path towards
a viable future. Making long-term
predictions is challenging, especially
in this age of continual disruption. But
our ongoing efforts to collect, analyse
and understand data at a granular level,
assess the impact of the trends affecting
our world and lay out the strategic
imperatives that all companies face allow
us to approach the exciting vista with a
sense of clarity and optimism.
4/27/18 5:13 PM
 Methodology and definitions
Historical data collection
All forecasts have been built starting
with the collection of historical data
from a variety of sources. A baseline of
accurate and comprehensive historical
data is collected in the first instance from
publicly available information, including
from trade associations and government
agencies. When this data is used directly,
these sources are cited accordingly.
In addition, interviews with relevant
associations, regulators and leading
players have been conducted to gather
insights and estimates not available in the
public domain. When this information is
collected, it is used as part of calculations,
and the sources are proprietary.
PwcOutlook18_043018_lj_18-BC-ej_lj-se_lj.indd 29
Forecasting methods
All forecasts are prepared as part of a
collaborative, integrated process involving
both quantitative and qualitative analysis.
The forecasts are the result of a rigorous
process of scoping, market mapping,
data collection, statistical modelling
and validation.
Note: All data, charts and graphs (unless
stated otherwise) in this publication
are taken from the Global Entertainment
& Media Outlook.
Definitions
Do you want access to consumer and
advertising spending data at the click of
a button? The Global Entertainment &
Media Outlook is a comprehensive source
of global analyses and five-year forecasts
of consumer and advertising spending
across 53 territories for 15 segments:
Books
Business-to-business
Cinema
Data consumption
Internet access
Internet advertising
Magazines
Music, radio and podcasts
Newspaper
OTT video
Out-of-home advertising
Traditional TV and home video
TV advertising
Video games and e-sports
Virtual reality
To access the full segment
definitions for the Outlook, please
visit www.pwc.com/outlook
Methodology and definitions 29
4/30/18 10:47 AM
 Use and permissions
Use of data in this publication
Material in this publication is drawn from
data in the Global Entertainment & Media
Outlook 2018–2022, a comprehensive
source of consumer and advertising
spend data available via subscription at
www.pwc.com/outlook. PwC continually
seeks to update the online Outlook data;
therefore, please note that the data in
this publication may not be aligned
with the data found online. The Global
Entertainment & Media Outlook 2018–
2022 is the most up-to-date source of
consumer and advertising spending data.
This document is provided by PwC for
general guidance only and does not
constitute the provision of legal advice,
accounting services, investment advice or
professional consulting of any kind. The
information provided herein should not be
used as a substitute for consultation with
professional tax, accounting, legal or other
competent advisers. Before making any
decision or taking any action, you should
consult a professional adviser who has
been provided with all pertinent facts
relevant to your particular situation.
The information is provided as is, with no
assurance or guarantee of completeness,
accuracy or timeliness of the information
and without warranty of any kind,
express or implied, including but not
limited to warranties of performance,
merchantability and fitness for a particular
purpose. Content from the articles in this
publication must not be excerpted, used
or presented in any portion that would
render it misleading in any manner or that
fails to provide sufficient context.
30 Global Entertainment & Media Outlook  2018 –2022
PwcOutlook18_043018_lj_18-BC-ej_lj-se_lj.indd 30
Permission to cite
No part of this publication may be
excerpted, reproduced, stored in a
retrieval system or distributed or
transmitted in any form or by any
means – including electronic,
mechanical, photocopying, recording
or scanning – without the prior
written permission of PwC.
Requests should be submitted in writing
to Angela Suh at angela.suh@pwc.com
outlining the excerpts you wish to use,
along with a draft copy of the full report
that the excerpts will appear in. Provision
of this information is necessary for every
citation request to enable PwC to assess
the context in which the excerpts are
being presented.
Without limiting the foregoing, excerpts
from the publication may be used only
for background market illustration,
should not be the sole source of 2018–
2022 information and must not form
the majority of sourced information.
About PwC
At PwC, our purpose is to build trust in
society and solve important problems.
We’re a network of firms in 158 countries
with more than 236,000 people who
are committed to delivering quality in
assurance, advisory and tax services.
Find out more and tell us what matters to
you by visiting us at www.pwc.com.
Supplier to the Outlook
Ovum, a provider of business intelligence
and strategic services to the global
telecoms and media markets (which is
a trading division of Informa Telecoms
and Media Ltd.), www.ovum.com
© 2018 PwC. All rights reserved. PwC
refers to the PwC network and/or one
or more of its member firms, each of
which is also a separate legal entity.
Please see www.pwc.com/structure
for further details. This content is for
general information purposes only, and
should not be used as a substitute for
consultation with professional advisers.
Global Entertainment & Media
Outlook is a trademark owned by
PricewaterhouseCoopers LLP.
4/30/18 10:50 AM
 Contributors

CJ Bangah
Kristina Bennin
Megan Brownlow
Wilson Chow
James DePonte
Karel Garside
Daniel Gross
Mark Maitland
Vicky Myburgh
Paolo Pigorini
Emmanuelle Rivet
Karim Sarkis
Phil Stokes
Sam Tomlinson
Ennèl van Eeden
Christopher Vollmer
Cecilia Yau

Many other professionals from the PwC

entertainment and media practice, across
53 territories, reviewed and added local
expertise to this publication.

Contributors 31

PwcOutlook18_042718_lj_18-BC-ej_lj-se_lj_V2.indd 31 4/27/18 5:13 PM

 Global Entertainment &
Media Outlook territory contacts
Global Czech Republic Ireland
Ennèl van Eeden Tomas Basta Amy Ball
ennel.van.eeden@pwc.com tomas.basta@pwc.com amy.ball@pwc.com

Argentina Denmark Israel

Ariel Vidan Leif Ulbaek Jensen Amir Gleit
ariel.vidan@ar.pwc.com leif.ulbaek.jensen@dk.pwc.com amir.gleit@pwc.com

Australia Egypt Italy

Megan Brownlow Bahjat El-Darwiche Maria Teresa Capobianco
megan.brownlow@pwc.com bahjat.eldarwiche@pwc.com maria.teresa.capobianco@pwc.com

Austria Finland Japan

Hannes Orthofer Tuomas Törmänen Yoshiki Seki
hannes.orthofer@pwc.com tuomas.tormanen@pwc.com yoshiki.seki@pwc.com

Belgium France Kenya

Kurt Cappoen Gad Azuelos Michael Mugasa
kurt.cappoen@pwc.com gad.azuelos@pwc.com michael.mugasa@pwc.com

Brazil Germany Korea

Sérgio Zamora Werner Ballhaus Bumtak Lee
sergio.zamora@pwc.com werner.ballhaus@pwc.com bumtak.lee@kr.pwc.com

Canada Greece Malaysia

John Simcoe Panagiotis Zisis Irvin Menezes
john.b.simcoe@pwc.com panagiotis.zisis@gr.pwc.com irvin.menezes@my.pwc.com

Chile Hungary Mexico

Federico Morello Marta Szucs Luis Roberto Martinez
federico.morello@cl.pwc.com marta.szucs@pwc.com luis.roberto.martinez@pwc.com

China & Hong Kong India Middle East/North Africa

Cecilia Yau Frank D’Souza Bahjat El-Darwiche
cecilia.yau@hk.pwc.com frank.dsouza@pwc.com bahjat.eldarwiche@pwc.com

Colombia Indonesia Netherlands

Giovanny Molina Sharly Rungkat Ennèl van Eeden
giovanny.molina@co.pwc.com sharly.rungkat@id.pwc.com ennel.van.eeden@pwc.com

32 Global Entertainment & Media Outlook  2018 –2022

PwcOutlook18_FINAL_Archive_051018_lj.indd 32 5/10/18 11:51 AM

New Zealand Saudi Arabia United Kingdom
Keren Blakey Bahjat El-Darwiche Mark Maitland
keren.j.blakey@nz.pwc.com bahjat.eldarwiche@pwc.com mark.o.maitland@pwc.com

Nigeria Singapore United States

Femi Osinubi Oliver Wilkinson Mark McCaffrey
femi.osinubi@pwc.com oliver.wilkinson@sg.pwc.com mark.mccaffrey@pwc.com
Christopher Vollmer
Norway South Africa
christopher.vollmer@pwc.com
Eivind Nilsen Vicky Myburgh
eivind.nilsen@pwc.com vicky.myburgh@pwc.com James DePonte
james.deponte@pwc.com
Pakistan Spain
Shabbar Zaidi Patricia Manca Vietnam
s.m.shabbar.zaidi@pk.pwc.com patricia.manca.diaz@es.pwc.com Ong Tiong Hooi
tiong.hooi.ong@pwc.com
Peru Sweden
Juan Carlos Mandujano Nicklas Kullberg
juan.carlos.mandujano@pe.pwc.com nicklas.kullberg@pwc.com

Philippines Switzerland
Mary Jade Roxas Patrick Balkanyi
jade.roxas@ph.pwc.com patrick.balkanyi@ch.pwc.com

Poland Taiwan
Paweł Wesolowski Gary Chih
pawel.wesolowski@pwc.com gary.chih@tw.pwc.com

Portugal Thailand
Antonio Correia Tina Hammond
antonio.correia@pt.pwc.com tina.ann.hammond@th.pwc.com

Romania Turkey
Florin Deaconescu Murat Colakoglu
florin.deaconescu@pwc.com murat.colakoglu@pwc.com

Russia UAE
Yury Pukha Bahjat El-Darwiche
yury.pukha@pwc.com bahjat.eldarwiche@pwc.com
 5 years from
right now...
The Technology, Media and Telecommunications Industries:
How will these industries change? Which countries are
showing the most growth? Which media segments will
emerge . . . or disappear? How will things like AI and AR
improve user experience?
These are the questions every industry decision-maker
needs answers to. They are the kinds of questions PwC’s
Global Entertainment & Media Outlook has been
answering for 18 years.
Our latest 5-year forecast is based on comprehensive,
comparable data centered on shifts in advertising and
consumer spending across 15 entertainment segments
and 53 territories.
Let us help you plan your business with the kind of clear
insight and data that can help you identify opportunity
across a complex and ever-changing media and
entertainment landscape.
To learn more, visit: www.pwc.com/outlook

PwcOutlook18_043018_lj_18-BC-ej_lj-se_lj.indd 34 4/30/18 10:53 AM

433405-2018-GEMO s+b 2018 Ad-Opt. 2.indd 1 3/20/2018 12:59:08 PM